The Wholesale Price Index (WPI) measures changes in the average prices of goods sold in bulk and transacted between businesses or entities rather than goods purchased by consumers.
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The Economic Advisor at the Ministry of Commerce and Industry publishes the WPI. WPI’s aim is to monitor changes in the pricing of items that represent supply and demand in industry, construction, and manufacturing.
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The WPI index basket divides commodities into three categories: primary articles, fuel and power, and manufactured products.
The government changed the base year for WPI from 2004-05 to 2011-12 in April 2017. WPI is often used for short-term policy action because it is the only weekly index available.
WPI also aids in the measurement of the economy’s macroeconomic and microeconomic circumstances. WPI estimates inflation at the wholesale transaction level for the economy as a whole. It also aids the government’s prompt involvement in monitoring inflation before price increases affect retail pricing.
The government uses WPI-based inflation to plan fiscal, trade, and other economic policies. WPI is used as an indexing tool by business organisations, policymakers, accountants, and statisticians to develop price adjustment clauses.
Inflationary pressures in the economy are indicated by a rise in WPI and vice versa. The rate of wholesale inflation in the economy is gauged by the magnitude of the WPI’s increase.
The WPI has certain limitations as a measure of inflation since it does not take into account the cost of services and does not accurately represent the country’s consumer pricing situation.